As India gears up to become a 3-trillion-dollar economy in the current year and a 5-trillion economy by the year 2024, all major powers of the world compete to announce the development of relations with India to be one of their main priorities.

In the meantime, time-tested friends and allies, Russia and India, are making a fresh and substantiated effort of bringing the scale of their economic cooperation up to the level adequate to their enhanced political partnership. Removal of bottlenecks and obstacles to bilateral trade and investments being the current priority for both sides.

One of the main constraints in trade between Russia and India is the lack of smooth independent banking infrastructure connecting the two countries. Russian-Indian trade turnover now stands at approximately 10 bln USD, with the governments of both countries confident that it has the potential to triple to 30 bln USD by the year 2025. Mutual investments can reach a level of 15 bln USD. Provided financial systems of both countries are ready for the challenge.

Russia is India’s leading partner in defence supplies: over 60% of all India’s purchases are coming from Russia. With large recent deals, such as the procurement of S-400 missile defence systems (estimated cost over 6 bln USD), this share is likely to grow. Although India aims to diversify its’ defence supplies and localize development and production, Indian officials have iterated consistently that India’s relations with Russia in the sphere of defence will remain a priority despite the unprecedented pressure coming from the West. Russia sees these policies on behalf of its’ Western partners as a manifestation of an unfair competition aimed at ousting Russia from international markets – be it defence equipment, energy or expertise.

Defence-related deals between Russia and India have demonstrated the vulnerability of the existing banking mechanisms of the two countries to third party actions. With US dollar payments put on hold in 2018, India and Russia had to urgently look for alternative solutions. Options on the table included coming back to trading in rupees and roubles, in euros, Singaporean dollars, etc. Importantly, this situation attracted the attention of bankers and decision-makers on both sides to the issue of payments.

In the current international political and trade environment characterised by unilateral actions on behalf of the key players – the problem is more widespread than one may notice, it goes beyond defence and runs across all other sectors, be it agriculture, transport, tourism or investments. Payments in US dollars, the traditional scheme of the international financial settlement, is proving to be inconvenient to the growing number of actors. Even in the cases where governments may be persistent not to fall prey to any external restrictions (as it happens between India and Russia), when it comes to banks –the situation is more complex due to increased transparency and centralization of the international banking system. SWIFT is a good example. Although it is highly unlikely that the Russian banks are ever denied access to this global system of financial messages, SWIFT is no longer seen as such. It is perceived to be a potential obstacle to fast transactions between Russia and the rest of the world. Development of an alternative is important and it is underway. It is generally agreed, that restrictions against Russia are here to stay. The fact that the list of companies and persons under restrictions can be extended at any moment is meant to send a deterring signal to existing and potential partners not just of Russia’s governmental institutions but of private business entities too. The growing need for independent international banking mechanism is evident.

Going back to payments in rupees and roubles is what comes to mind as a logical option. Memories of lucrative trade between India and the Soviet Union conducted in national currencies run deep and this mechanism cannot be excluded from the list of alternatives entirely. However, it is obvious that the world has changed, it is immensely more interdependent and connected today than in the times of the Soviet Union and this type of trading mechanisms a limitation to globalised business actors on both sides.

With some of the world’s leading minds in science and technology, the rapid development of FinTech sector and complimenting capabilities in ICT, India and Russia now have a unique opportunity to shape the future of global banking. Working together early in the process the two countries can set the trends in financial solutions that will not just serve as the basis for the absolute and qualitative increase in bilateral trade, but become the platform to efficient and trusted financial interaction for a large number of actors globally. Brazil, Russia, India, China and South Africa (the countries of BRICS) accounting for 43% of the world’s population, 37% of global output and 17% of the world trade are the perfect testing ground for alternative solutions. Further engagement with the countries of Europe and Central Asia, equally interested in extending their trade and business networks, would ultimately mean better interconnected, more secure and prosperous Eurasia.

Finance is just one area among a broad range of issues related to cooperation in innovative technology and digital transformation between India, Russia and other countries. No doubt that many of these matters will be within the focus of attention of global business and political leaders at the forthcoming Eastern Economic Forum in Vladivostok, Russia’s gateway to Asia, in September this year, where Honourable Prime Minister N.Modi will be the Chief Guest.